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Bank of America (
BAC) has been a stranger to our Rocket Stocks list for the past several years -- and for good reason. The risk-reward tradeoff in the country's biggest banks haven't looked all that appealing for a while now. After all, regional banking names offer similar exposure with bigger dividend payouts and fatter margins, while avoiding the headline risk inherited from problematic acquisitions made in the heat of the financial crisis.
But BofA is starting to look attractive again.
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One of the biggest reasons for BAC's sudden attractiveness is the fact that it's already taken the kicks in the teeth that came with writing off billion of dollars in debts and shaking the skeletons out of its labyrinthine balance sheet. Investors today get to jump in to a firm that's already done most of the hard work. The
Fed continues to be a major boon for the banking sector. As long as money remains effectively free, BAC is able to earn hefty margins, especially now that mortgage rates are becoming upwardly mobile again. While we're not headed for another high-rate environment anytime in the foreseeable future, banks still don't need high rates to earn high returns.
Lots of regulatory eyes on BofA means that the firm won't be allowed to repeat its mistakes of the past anytime soon. While it also means that shareholder returns will be an afterthought for regulators, BAC has plenty of internal investment options as it rebuilds its coffers. And with a strong investment business in play right now, a rising market tide should continue to lift shares of Bank of America in 2013.